UK productivity shows small gain in third quarter after grim run - ONS

LONDON (Reuters) - Productivity in Britain, a major vulnerability of the country's economy that Prime Minister Boris Johnson has promised to fix, improved only slightly in the July-September period of last year, according to official data published on Wednesday.

After contracting in the previous four quarters, output per hour worked rose by 0.1% in the third quarter compared with the same period of 2018, the Office for National Statistics said.

Growth in productivity is key to the long-term prospects for growth and prosperity of an economy.

"Although productivity grew on the year, the underlying picture is of sustained weakness since 2008, with growth over the past year being only a third of the average over the last 10 years or so," ONS statistician Katherine Kent said.

Over the last decade, annual growth in productivity has yet to even touch its pre-financial crisis average between 1972 and 2008.

(GRAPHIC: UK productivity growth yet to touch pre-crisis average click, https://fingfx.thomsonreuters.com/gfx/polling/1/650/646/prod1.png)

Johnson and his finance minister Sajid Javid are planning a big increase in infrastructure investment to tackle Britain's weak productivity record which lags behind those of other countries such as Germany and France.

Responding to the latest data, Javid said low productivity had held back Britain for too long and that he planned to address this in his March 11 budget.

"The government's spending ambitions for our broadband and transport networks offer some hope for uplift down the line," Tej Parikh, chief economist at the Institute of Directors, said.

"But long-term capital investments must not displace efforts to jump-start improvements to our business environment today," he said, calling for more incentives to small companies to invest, less red tape and more access to training.

The ONS also said unit labour costs rose by 3.6% in annual terms in the third quarter, back to a level last hit at the end of 2018, as wages rose faster than gains in productivity.

Economists link the recent weakness in productivity growth in Britain to the surge in hiring by many employers who opted to take on staff rather than make longer-term commitments to investment in the face of uncertainty over Brexit.

(Writing by William Schomberg, editing by Andy Bruce)